-LRB- CNN -RRB- -- Lego boss Jorgen Vig Knudstorp , who pulled the iconic toy brand back into profit , says Europe needs to face up to its harsh economic reality .

Knudstorp believes Europeans think they are wealthier than they are , despite three years of a global financial crisis .

With the crisis continuing to roil markets and destabilize the banking sector , `` it 's about all of us recognizing that we have lost a bit of our wealth , '' he says .

Lego lost its way in the late 90s and went deeply into debt before rebounding to double digit growth under Knudstorp 's leadership .

Knudstorp suggests European finance ministers could learn from Danish manufacturer 's experience . `` My piece of advice would be : face the truth -- that is what I learned the hard way in our company . ''

Knudstorp says Lego went too deeply into debt , as Europe has also done . According to Knudstorp , stemming the crisis will begin by saying : `` Yes we are over-indebted , we are sorry , we screwed up . ''

He believes Europe needs to write-off some of its debt to avoid a stagnant economy for the next decade .

`` I think we are moving from a 30 year period of just borrowing more and more money at the government level and also at the household level , '' Knudstorp says .

However , he says , Europe is entering a phase where raw material costs could increase while the availability for cheap labor around the world will decline .

At Lego , Knudstorp will be focused on ensuring the company adapts to the changing economic conditions , which he believes are crucial to ensure survival . Lego is also renewing its portfolio of products , and plans to launch toys specifically designed for girls .

But Knudstorp also emphasis the needs to keep things simple . `` You need to challenge your organization all the time , to stay coherent , not make things too complicated , '' he says . `` A lot of productivity is lost inside the company when things get complicated . ''

CNN 's Emily Smith has contributed to this report .

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The boss of Lego says Europe needs to face up to its harsh economic reality

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Jorgen Vig Knudstorp believes Europeans think they are wealthier than they are

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He says Europe needs to write-off some of its debt to avoid a stagnant economy for the next decade